Will we go over the dairy cliff?

Why in the world would voters decide to keep the same people in office, as they did on Nov. 6, when those people have taken us to this point?

Every day, there are dire warnings of milk prices in the grocery store going to $6 per gallon because of the “dairy cliff.” Read this story from The (Syracuse) Post-Standard.

I have resisted the temptation to run a new story every day. We first mentioned the possibility of higher milk prices in September, with these comments by U.S. Rep. Collin Peterson (D-Minn.), ranking member of the House Agriculture Committee. Nothing much has changed since that time ― a new farm bill that would avert the dairy cliff is still stalled in Congress.

Some of the people who commented on the story in September were excited about the possibility of $38 milk for farmers. At first blush, a $38 price does seem very attractive. And, it could happen. In the absence of a new farm bill, dairy policy will revert to a 1949 law which would essentially quadruple federal price supports for cheese, butter and powder. That, in turn, would bring milk prices up to the $38 to $40 per hundredweight level.

But do we really want that to happen? Many consumers would balk at paying $6 for a gallon of milk, and consumption would go down. It’s really the last thing the dairy industry needs at a time when fluid milk consumption is dropping like it is. See “Milk consumption about to fall below an important threshold.”

So, what could happen?

First, Congress could pass a new farm bill by Dec. 31, which would get things back on track. I believe the version of the farm bill passed this summer by the U.S. Senate and House Agriculture Committee contains key reform measures that would help dairy farms, but those measures can’t be implemented until a final version is passed by the full House. Unfortunately, the possibility of that happening by Dec. 31 is growing more and more unlikely.

A more likely scenario is that Congress will link the pending farm bill with some kind of resolution to the fiscal cliff dilemma that it is currently facing, as well. It makes a certain amount of sense, since the farm bill has already been targeted for spending cuts. It would be a hybrid approach, possibly buying some time and taking us far enough into 2013 to allow Congress to pass a free-standing farm bill without going over the “dairy cliff.”

We shall see. Frankly, I am losing confidence in the White House and Congress with each passing day.